Module 19 min810 wordsFree — no account
Understanding French corporate tax: who pays, on what, at which rate
The explanation, in the order it is meant to be read · 21 sections · 769 words · 5 min
Camille founded Livria, a single-shareholder simplified company (SASU) selling editorial consulting. First financial year: €180,000 in revenue, €138,000 in expenses, €42,000 in profit. In April, her accountant announces €6,300 of corporate income tax. Why 15% rather than 25%? Why is the payment due in May? And why will instalments follow the next year? This course follows Livria from year-end closing to the final payment, with every figure worked out.
What you will be able to do
- Determine whether your company falls under French corporate tax, automatically or by election.
- Tell accounting profit and taxable profit apart — only the latter is taxed.
- Apply the right rate: 25% standard, 15% for SMEs under three cumulative conditions.
- Redo Livria's computation step by step, then check your own with the corporate tax calculator.
Who pays corporate income tax?
French corporate income tax (impôt sur les sociétés, IS) applies to the profits of capital companies operating in France. SAS, SASU, SA and most SARL companies are subject to it automatically, from their very first financial year, with no formality required.
Other structures normally fall under personal income tax but may elect corporate tax: the single-member EURL, general partnerships, and some civil companies with a commercial activity. The election is a lasting commitment — run the numbers before signing, never after.
- Automatically: SAS, SASU, SA, SARL (unless the family-owned SARL election applies), SCA.
- By election: EURL, general partnerships (SNC), civil companies with a commercial activity.
- In the other direction: an SAS or SARL younger than 5 years can temporarily elect the partnership regime, for at most 5 financial years.
The tax return remains due every single year, even when the year ends in a loss or the company had no activity at all. A loss triggers no tax, but it must be filed — and it carries forward against future profits.
The base: from accounting profit to taxable profit
Corporate tax is computed neither on revenue nor on cash received. It applies to taxable profit: the accounting result of the financial year, adjusted by tax rules that deliberately depart from accounting treatment.
Some booked expenses are not tax-deductible — fines, the lavish fraction of certain expenses, the excess part of car depreciation. These are "added back". Conversely, exempt income and usable losses carried forward are deducted from the result.
Definition
Taxable profit — Accounting result of the year, increased by add-backs (non-deductible expenses) and decreased by deductions (non-taxable income, prior losses offset). This figure, and this figure alone, is what corporate tax applies to.
The bridge from accounting to tax is formalised on table 2058-A of the annual tax bundle — we fill it in during module 2. Keep the order in mind: accounting first, tax adjustments second, tax computation last.
Two rates: 25% and the SME reduced rate
Key figures
- Standard rate
- 25% of taxable profit
- SME reduced rate
- 15% up to €42,500 of profit
- Revenue ceiling (reduced rate)
- under €10,000,000
- Share capital
- fully paid up, held ≥ 75% by individuals
The standard rate is 25%, whatever the amount of profit. SMEs enjoy a reduced 15% rate on their first €42,500 of profit per twelve-month financial year; anything above that threshold remains taxed at 25%.
For a small structure, the reduced rate is a genuine cash lever: on €42,000 of profit, Livria saves €4,200 a year compared with the standard rate. Checking the three eligibility conditions before closing the books is therefore worth an hour of anyone's time.
Summary table
| SME reduced-rate condition | Threshold to meet |
|---|---|
| Revenue excluding VAT for the financial year | under €10,000,000 |
| Share capital | fully paid up at year end |
| Ownership by individuals (directly, or through an eligible company) | at least 75% of the capital |
The three conditions are cumulative. Capital subscribed but not paid up, or a non-eligible holding company among the shareholders, is enough to lose the reduced rate. The gap adds up quickly: as much as €4,250 of extra tax per financial year.
Your own computation takes thirty seconds: the corporate tax calculator linked to this course applies the rate schedule and the SME conditions, and the instalments calculator then walks through the payment deadlines covered in module 3.
Mistakes to avoid
- Confusing revenue with profit: corporate tax hits taxable profit, not cash inflows — a loss-making company pays no corporate tax, however large its revenue.
- Assuming the reduced rate is automatic: capital not fully paid up, or individual ownership below 75%, sends the whole profit back to the 25% rate.
- Forgetting that the €42,500 ceiling is assessed per twelve-month period: it is prorated for a shorter or longer financial year.
- Reasoning on a cash basis: a December invoice collected in January still belongs to the closed year — accrual accounting is mandatory.
Educational content, current with the sources cited. It does not replace advice tailored to your situation. These courses are neither certifying nor CPF-eligible: they prepare for no certification registered with the French RNCP or specific register.